THE GEOGRAPHIC BASIS OF EXCHANGE The Conditions Which Create a Surplus.—Good business, as we have seen, involves an exchange which is profitable to both parties. Such an exchange requires a surplus on one side and a demand on the other. That is, one person, company, or country must have more of something than is needed for immediate use, while someone else must need that particular thing. The thing for which there is a demand may be a concrete product like spices, lead, or adding machines, or services such as day labor, clerical work, or the skill of a great pianist. Let us see how variations in the surplus supply of goods and in the demand cause business transactions to vary in kind, number, and quality from one part of the world to another.
Everything which favors production also favors the creation of a surplus. A level plain, fine rich soil, easy access to navigable waters, and a climate with sufficient warmth, moisture, and sunshine, all stimulate the production of most of the vegetable and animal products which enter into the world's food supply and furnish raw materials for manufacturing and commerce. On the other hand, a rugged topography encourages the production of lumber and of crops like fruit and coffee. In conjunction with a dry climate a rugged topography generally favors the production of metals. These physical conditions, however, including also their effect on transportation, are not the chief factor in producing a surplus. Still more important is the quality of the people, their inherited mental ability, their energy, and their standard of living. New Guinea's physical advantages would allow it to raise enough rice for almost the whole world, together with great quantities of sugar, corn, sago, cocoa, tea, coffee, tobacco, and many other products, but it has no surplus. Its backward people produce almost nothing except what they immediately consume. In Java, however, where the climate is almost the same, the presence of nearly 150,000 Europeans, chiefly Dutch, causes an island smaller than New Guinea to export Products worth half a billion dollars each year. Again, in China the upplies of coal are almost as good as in Britain, but until Europeans Look the lead, the Chinese mined practically no coal even for local consumption. Vast quantities lay in the rocks, but there was no surplus for business.
On the other hand, Norway has almost no mineral wealth; her cool climate greatly limits the crops; deep soil is found only in a few valleys and on a narrow coastal plain; and the rugged topography permits only one acre in thirty to be cultivated. Yet so energetic and capable are the Norwegians that their abundant surplus not only supports an active trade at home, but makes Norwegian exports fourteen times as valuable as those of Java in proportion to the inhabitants. Again,
Alaska never yielded any surplus worth mentioning while it was in the hands of Eskimos, Indians, and even Russians; but from the time when it was bought by the United States until 1920 it yielded a salable surplus worth about a billion dollars. So, too, although New England has no coal, few raw materials, and not nearly enough water power, the capacity of its people causes it to produce an enormous surplus of manufactures.
The Conditions Which Create a Demand.—The conditions which create a demand are in one sense the opposite of those which create a surplus. If a region lacks certain natural advantages, it often demands articles which can be produced only with the help of such advantages. The United States demands a vast quantity of ba nanas and gets them from Central America because the Central American climate favors banana growing and that of the United States does not. New England, being too rugged for extensive wheat cultivation, demands wheat from the Western plains, while Germany, having little copper, demands it from places like Arizona and Montana.
In a more important sense the conditions which create a demand are exactly the same as those which create a supply. For example, the fact that coal and iron are scarce in Ceylon does not cause the four million people of that island to demand a tenth or perhaps a hundredth as much of those two highly important products as is demanded by a similar number of people in the Netherlands. The thing that counts chiefly in creating a demand, just as in creating a supply, is the mental ability, physical en ergy, and stage of civilization of a country. So far as actual resources are concerned Siam with eight million people ought t o supply more and demand more than Switzerland with four million. The area of Siam is 195,000 square miles, while that of Switzerland is only 16,000. Siam also has a far more productive climate than Switzerland, a vastly greater area of plains, and excellent deposits of tin as well as some other minerals, whereas Switzerland has prac tically no minerals. If the people of Siam and of Switzerland were of exactly equal ability, these conditions might cause the trade of Siam to be at least double that of Switzerland. But in the normal period before the Great War Siam did not import a single product to the value of one dollar per inhabitant each year, as appears below, and only four to the extent of fifteen cents or more per inhabitant. Switzer land, on the contrary, imported twenty products to the value of at least one dollar per person, and many others to the extent of at least fifteen cents.